P6 Advanced Taxation
June 2010 Important Topics

This is the sixth exam of the new syllabus under the current examiner, Rory Fish. The world pass rate have varied over the five previous diets from 28% (Dec 07); 36% (June 08); 41% (Dec 08), 37% (June 09) and 39% (Dec 09).
The style of the paper is significantly different from the previous syllabus (Paper 3.2), and questions set before the current examiner took office (Dec 06) are of limited use at the final revision stage unless they have been revised to take account of his style.

Exam Tips

Providing a list of potential questions for this exam (as done for F6) is almost pointless, as the examiner has such a wide range of topics that he can incorporate into any number of multi-tax personal or business tax question scenarios. Indeed, it may be counterproductive, as it tempts students to focus on narrow specific issues rather than on the basic requirements for success.

However, students should fully understand the Finance Act 2009 issues which are examinable for the first time in this exam, and these will probably be helpful in some of the questions which could appear in the exam.

Please look at the Finance Act article published in the September 2009 Student Accountant for a brief overall summary. The main issues to which you should pay attention are: (1) the new rules for giving capital allowances on motor cars; (ii) the temporary rules brought in to offset effects of the current economic recession (ie the introduction of 40% FYA on all expenditures except motor cars and special rate pool assets and the extension of the trading loss carry back rules for both income tax and corporation tax; (iii) the exemption from corporation tax of foreign dividends and the extension of the 10% tax credit rule for individuals in receipt of foreign dividends to include dividends on any size of shareholding; (iv) detailed changes on tax management rules, including the new appeals procedures against assessments raised by HMRC, in particular after an enquiry, and (v) changes in VAT regulations relating to filing, partial exemption and the place of supply of services when made to customers in other countries.

The examiner has also published a series of articles (revised for the Finance Act 2009) in Student Accountant (January, February and March 2010) covering Corporation tax and groups, Trusts and tax, CGT and Inheritance tax and personal foreign tax matters. These must be read. Additionally, the April edition includes an article headed Exam Notes, which set out the information that will be attached to the exam paper for June 2010.

Exam Technique

P6 is a tough paper, with questions requiring mainly discursive answers or computations where a tax liability is part of the computation rather than an end in itself (eg one element in calculating the after tax income/profit position of the taxpayer).

The examiner sets questions on a variety of multi-tax personal and business tax scenarios in a ‘professional practice office style’ and expects a professional person’s answer. This is particularly true of section A questions which normally require a report or memorandum of matters to be included in a report or letter to a client or to be used as a basis for a meeting with a client, with key points in the main answer and details and calculations relegated to workings. In section B, the answer requirements are more straightforward but still require students to work from details presented in a practice office format, and from a technical standpoint, are not necessarily any easier than the Section A questions.

Students must:

(1) Demonstrate a thorough grasp of the required tax rules relevant to a problem. Most questions will feature at least one new topic area in P6. However, as the examiner has reminded people, significant aspects of the F6/old syllabus 2.3 papers will also feature. In this last respect, the key matters brought forward are the availability and operation of major tax reliefs (eg relief for losses, capital expenditures and pensions contributions and CGT holdover and rollover reliefs); awareness of the different tax exempt gains and incomes (eg certain benefits arising from employment and tax favoured investments (eg ISAs, furnished holiday lettings and the taxpayer’s principal private residence); VAT generally; and dealing with HMRC (ie the self-assessment regime – payment rules, time limits for claims, interest and penalties for non-compliance)

(2) Apply appropriate communication skills, namely (a) answering the question set; (b) keeping the written points brief and logically organised using headings/ sub-headings and lists – the old maxim of a little about a lot rather than a lot about very little holds good; (c) producing appropriate computations.

(3) Use the 15 minutes of pre-reading time wisely. There is not enough time to plan any answer in detail; the most important thing is to identify the broad thrust of each and every question, with particular emphasis on the answer requirements;
and to decide the best order in which to attempt the questions

If possible attempt all questions. Prize winners apart, a 70% complete answer on four questions produced in an acceptable format and identifying most of the main issues will be a recipe for success.

By Colin Channer